An overdraft happens when you spend more money than your checking account balance, causing it to go negative. Your bank may cover the transaction and charge an overdraft fee, or decline it. Understanding how overdraft works helps you avoid costly fees.
An overdraft occurs when a withdrawal, payment, or debit purchase exceeds the available balance in your checking account, driving it below zero. The bank faces a choice: cover the transaction and charge a fee, or decline it. Federal rules give you control over which path applies to debit card purchases — but the rules differ for checks and ACH payments.
When a bank covers an overdrawn transaction under its standard overdraft service, it typically charges a flat fee per item — historically $25–$35 per transaction at large banks, though amounts have declined at many institutions in recent years. Some banks also charge a sustained overdraft fee if the account stays negative for several days. The CFPB has studied overdraft and NSF fee revenue at the largest U.S. banks.
Under Federal Reserve Regulation E, banks must obtain your affirmative consent (opt-in) before enrolling you in overdraft coverage for one-time debit card transactions and ATM withdrawals. If you don't opt in, the bank must decline those transactions at the point of sale rather than let them overdraw. You have no automatic opt-in right for checks or recurring ACH payments — those can still be paid and charged a fee by default.
Set up low-balance alerts through your bank's mobile app, link a savings account as an overdraft protection source (many banks transfer funds for a small flat fee rather than a per-item overdraft charge), or opt out of standard overdraft service so debit purchases are declined instead of covered. Monitoring your available balance — not just your posted balance — is the most reliable prevention. The CFPB's overdraft explainer covers your rights in plain language.